Tensions flare over law to expand railway competition

A new rail shipping rule passed Thursday is meant to drive down costs, but it's awoken two Canadian railway giants now fighting over concerns about expenses and congestion.

A new rail shipping rule is poised to drive up inefficiency and consumer costs.

Or it will drive them straight down. It depends who you ask.

Set to come into effect with Ottawa’s federal budget bill, an obscure law has Canada’s two main railways fighting back over concerns about expenses and congestion, with the drama playing out in social media posts and a backroom lobbying push.

At the centre of the tempest in a train yard is legislation that aims to expand what’s known as extended interswitching, a seldom-heard term that describes a critical practice in the rail industry.

Interswitching refers to the transfer of cargo between two rail companies at a point where their tracks meet. Extended interswitching is when Company A must transport that cargo along its own tracks to a point where it meets Company B’s rails, and it’s currently required on request for distances of up to 30 kilometres.

The practice seeks to spur competition, as someone shipping from a grain elevator on Canadian National Railway Co. tracks, for example, could choose to have the freight transported by Canadian Pacific Kansas City Ltd. instead if the price is better.

The budget bill, which passed in the House of Commons on Thursday and now awaits Senate approval, proposes a pilot that would extend the interswitching zone to 160 kilometres from 30 kilometres in the three Prairie provinces for an 18-month period.

The move aims to tamp down prices, but it has awoken Canada’s two railway giants, prompting them to go on the offensive to warn of the deep harm they say it will inflict.